Hong Kong's Golden Harvest Entertainment (GHE) is making an aggressive push into the Internet, following Taiwanese hardware giant Acer's investment in the company, and has also unveiled plans to step up exhibition activities in mainland China.

In a deal mirroring AOL's merger with Time Warner, Acer Digital Services Group (ADSG) recently bought a 22% stake in GHE. Taiwan-based investment company South-East Asia Investment Holding acquired a further 8% (Screendaily, April 12).

The deal forms the backbone of GHE's plans to launch a raft of digital services, starting with a music portal, reportedly in a three-way deal with ADSG and Hang Lung Development Co. In turn, ADSG is eager to diversify into entertainment content: "ADSG needs to provide a leading-edge Internet entertainment medium to customers, and it can do so now by co-operating with the number one film entertainment provider in Asia," said ADSG chairman George Huang.

According to GHE managing director Phoon Chiong-kit, the company plans to use the Internet to tap the "overseas Chinese diaspora which is vast, rich and culturally connected."

"The Internet will let me get at them," said Phoon. "When these two markets [content and technology] come together, and we refine distribution, then we will have a market that could rival Hollywood."

Observers have questioned whether GHE is rich in content as Warner Bros acquired a large portion of its library in a $25m deal last year. However Phoon said the company has been quietly rebuilding it catalogue, acquiring about 70 Chinese titles and investing $12.8m (HK$100m) in pictures not produced under the Golden Harvest Productions (GHP) banner.

However the company also intends to resume in-house production and plans to make about 10-12 pictures this year through GHP. GHE chairman Raymond Chow has sold both GHP and Golden Harvest Marks - which owns the Golden Harvest brand name - to the publicly listed GHE in an attempt to fully integrate the company.

In addition, GHE has also unveiled an ambitious exhibition strategy that includes building 15-20 cinemas in mainland China to add to its existing two sites in Shanghai. Much of the plan depends on availability of sites and economics - equipment has to be imported into China and ticket prices remain low - but is consistent with GHE's aim of building businesses in Chinese-speaking markets. The company sold its interests in Thailand and South Korea this February to focus on China, Malaysia, Hong Kong and Singapore.

GHE faces competition in mainland China from local player China Star Entertainment and US chains Warner Bros, AMC and UCI which have all announced plans to move into the region. Real estate brokers, anticipating the demand, are holding out for the highest prices, but Phoon is standing tough: "I can't afford to pay the rents I pay in Singapore so if you want me to go into a bidding war I'll walk away," Phoon said.

Meanwhile, GHE has also launched a music label - as part of it ambition to launch a music portal - and a new logo to stamp the company's drive into new areas of business.

On the downside, GHE is facing a lawsuit from former executive director Peter Choy Tuk-sang, who claims that Chow failed to transfer 40 million shares in the company despite a High Court demand on March 22. GHE also faces a petition from Chase Manhattan Bank which claims it flouted a loan deal by selling part of its library to Warner.